Tammy C. from Kalamazoo, MI asks: Hi Mitch, it is nice to see that the stock market recovered last week, but I’ll admit I’m still on edge. The market does not feel super stable and with the election nearing it seems like more volatility is coming. Do you have any thoughts or advice to navigate through this period? Thank you!
Mitch’s Response:
Market volatility can be unsettling, especially when it is downside volatility accompanied by worrisome news, like a weaker-than-expected jobs report and technical factors many investors find confusing, like the unwinding of the carry trade based on rising interest rates in Japan.
To put it differently, I understand that many people share your concerns.
As I’ve written recently, I see the current market volatility as a byproduct of a quick shift in sentiment and technical factors—not fundamental drivers tied to the U.S. or global economy. Real wages have been rising, inflation has been trending lower, the U.S. consumer continues to spend at a better-than-expected rate, and the services sector remains in expansion mode. I’m not seeing signs of a recession in the second half of the year.1
This assessment gives me confidence that the selling pressure is more corrective than part of a longer-term trend, which I think means it is best to remain patient and avoid knee-jerk changes to investment portfolios.
How Market Volatility Can Benefit Your Portfolio
Although volatility can be unsettling, it is important for investors to notice its potential benefits.
Market fluctuations can be challenging, but with decades of experience, I’m offering our insights on how to use volatility to your advantage in our free guide, Using Market Volatility to Your Advantage2.
Our expert analysis will cover:
- How market volatility can “shake up” complacent investors
- Potential bargains that may be uncovered through turbulence
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- Plus, more ways you may be able to benefit from a volatile market
If you have $500,000 or more to invest, download our free guide today!
Download Our Guide, “Using Market Volatility to Your Advantage”2
Now, I realize that the answer to “do nothing” is probably not very satisfying, so I want to give you some advice on what I think you should do now to address your feeling of being “on edge.”
The first thing I recommend is to revisit your entire financial situation, long-term goals, cash flow needs, etc. This exercise may seem daunting and time-consuming, but the goal is to give you confidence that your investment portfolio and overall asset allocation are aligned with your long-term goals and needs. In other words, are you still on track to reach your objectives?
If the answer is yes, then hopefully you can feel better about how you’re positioned in the current markets. Volatility is a normal, natural feature of equity investing, and I often say it is the price investors pay for attractive long-term returns. If you’ve reviewed your financial situation, goals, and investment portfolio—and everything is aligned—then it is important to remember that your portfolio is set up to weather ups and downs over time. Corrections and even bear markets are simply part of the process. Since 1980, the average intra-year decline for the S&P 500 is -14.3%, which reminds us that downside volatility is not an anomaly of equity investing—it is a feature of it.
The issue that often troubles many investors – and ultimately hurts them – is that they let volatilityincrease their temptation to “time the market,” allowing short-term uncertainties to drive their decision-making. But if your long-term goals and financial situation have not significantly changed in the last few weeks, then it is very likely your investment portfolio should not change, either.
To make the most out of these turbulent times, I am offering all readers our guide, Using Market Volatility to Your Advantage3. This guide provides expert insights into how a volatile market can help investors refine their strategies and potentially achieve strong returns over time.
It also covers:
- How market volatility can “shake up” complacent investors
- Potential bargains that may be uncovered through turbulence
- Why volatility may help prevent overheating and market “bubbles”
- What history shows us about opportunities for steady investors in turbulent markets
- Plus, more ways you may be able to benefit from a volatile market
If you have $500,000 or more to invest, download this free guide today by clicking on the link below.
Disclosure
1 Wall Street Journal. August 5, 2024. https://www.wsj.com/personal-finance/stock-market-selloff-portfolio-d47d4c59?mod=personal-finance_trendingnow_article_pos3
2 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion
3 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion
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